844 days, 20,256 hours, 1,215,360 minutes, or 72,921,600 seconds. That is the approximate duration of my world tour. I never wanted it to end and now, in a manner of speaking, I suppose it never has to. If you wish to go by country do so by clicking on one above. They are numbered in the order I visited them, more or less. If you enjoy reading about it even a tenth as much as I enjoyed living it then you will not have wasted your time. Grab a refreshing beverage, settle in a comfortable chair, and make a journey across the world, experiencing it as I did. Then get off your ass and check it out for yourself. You're not getting any younger.

Sri Lanka Facts (U.S. Department of State)

GeographyArea:
65,610 sq. km. (25,332 sq. mi.); about the size of West
Virginia.Cities: Capital--Colombo
(pop. est. 1.3 million--urban area). Sri Jayewardenepura-Kotte is the
officially designated capital and is the site of Parliament. Other
cities--Kandy
(150,000), Galle (110,000), Jaffna (100,000).Terrain:
Coastal plains in the northern third of country; hills and mountains
in south-central Sri Lanka rise to more than 2,133 meters (7,000
ft.).Climate:
Tropical. Rainy seasons--light in northeast, fall and winter, with
average rainfall of 50 in.; heavy in southwest, summer and fall, with
average rainfall of 200 in.

PEOPLEThe
Democratic Socialist Republic of Sri Lanka (formerly known as Ceylon)
is an island in the Indian Ocean about 28 kilometers (18 mi.) off the
southeastern coast of India with a population of about 21 million.
Density is highest in the southwest where Colombo, the country's main
port and industrial center, is located. The net population growth
rate is about 1%. Sri Lanka is ethnically, linguistically, and
religiously diverse.

Sinhalese
make up 74% of the population and are concentrated in the densely
populated southwest. Sri Lankan Tamils, citizens whose South Indian
ancestors have lived on the island for centuries, total about 12%,
live throughout the country, and predominate in the Northern
Province.

Indian
Tamils, a distinct ethnic group, represent about 5% of the
population. The British brought them to Sri Lanka in the 19th century
as tea and rubber plantation workers, and they remain concentrated in
the "tea country" of south-central Sri Lanka. In accordance
with a 1964 agreement with India, Sri Lanka granted citizenship to
230,000 "stateless" Indian Tamils in 1988. Under the pact,
India granted citizenship to the remainder, some 200,000 of whom now
live in India. Another 75,000 Indian Tamils, who themselves or whose
parents once applied for Indian citizenship, chose to remain in Sri
Lanka and have since been granted Sri Lankan citizenship.

Other
minorities include Muslims (both Moors and Malays), at about 7% of
the population; Burghers, who are descendants of European colonists,
principally from the Netherlands and the United Kingdom (U.K.); and
aboriginal Veddahs. Most Sinhalese are Buddhist; most Tamils are
Hindu. The majority of Sri Lanka's Muslims practice Sunni Islam.
Sizable minorities of both Sinhalese and Tamils are Christians, most
of whom are Roman Catholic. The 1978 constitution--while assuring
freedom of religion--grants primacy to Buddhism.

Sinhala,
an Indo-European language, is the native tongue of the Sinhalese.
Tamils and most Muslims speak Tamil, part of the South Indian
Dravidian linguistic group. Use of English has declined since
independence, but it continues to be spoken by many in the middle and
upper middle classes, particularly in Colombo. The government is
seeking to reverse the decline in the use of English, mainly for
economic but also for political reasons. Both Sinhala and Tamil are
official languages.

HISTORYThe
actual origins of the Sinhalese are shrouded in myth. Most believe
they came to Sri Lanka from northern India during the 6th century BC.
Buddhism arrived from the subcontinent 300 years later and spread
rapidly. Buddhism and a sophisticated system of irrigation became the
pillars of classical Sinhalese civilization (200 BC-1200 AD) that
flourished in the north-central part of the island. Invasions from
southern India, combined with internecine strife, pushed Sinhalese
kingdoms southward.

The
island's contact with the outside world began early. Roman sailors
called the island Taprobane. Arab traders knew it as "Serendip,"
the root of the word "serendipity." Beginning in 1505,
Portuguese traders, in search of cinnamon and other spices, seized
the island's coastal areas and spread Catholicism. The Dutch
supplanted the Portuguese in 1658. Although the British ejected the
Dutch in 1796, Dutch law remains an important part of Sri Lankan
jurisprudence. In 1815, the British defeated the king of Kandy, last
of the native rulers, and created the Crown Colony of Ceylon. They
established a plantation economy based on tea, rubber, and coconuts.
In 1931, the British granted Ceylon limited self-rule and a universal
franchise. Ceylon became independent on February 4, 1948.

Post-Independence
PoliticsSri
Lankan politics since independence have been strongly democratic. Two
major parties, the United National Party (UNP) and the Sri Lanka
Freedom Party (SLFP), have generally alternated rule.

The
UNP ruled first from 1948-56 under three Prime Ministers--D.S.
Senanayake, his son Dudley, and Sir John Kotelawala. The SLFP ruled
from 1956-65, with a short hiatus in 1960, first under S.W.R.D.
Bandaranaike and then, after his assassination in 1959, under his
widow, Sirimavo, the world's first female chief executive in modern
times. Dudley Senanayake and the UNP returned to power in 1965.

In
1970, Mrs. Bandaranaike again assumed the premiership. A year later,
an insurrection by followers of the Maoist "Janatha Vimukthi
Peramuna" (JVP, or "People's Liberation Front") broke
out. The SLFP government suppressed the revolt and declared a state
of emergency that lasted 6 years.

In
1972, Mrs. Bandaranaike's government introduced a new constitution,
which changed the country's name from Ceylon to Sri Lanka, declared
it a republic, made protection of Buddhism a constitutional
principle, and created a weak president appointed by the prime
minister. Its economic policies during this period were highly
socialist and included the nationalization of large tea and rubber
plantations and other private industries.

The
UNP, under J.R. Jayewardene, returned to power in 1977. The
Jayewardene government opened the economy and, in 1978, introduced a
new constitution based on the French model, a key element of which
was the creation of a strong executive presidency. J.R. Jayewardene
was elected President by Parliament in 1978 and by nationwide
election in 1982. In 1982, a national referendum extended the life of
Parliament another 6 years.

The
UNP's Ranasinghe Premadasa, Prime Minister in the Jayewardene
government, narrowly defeated Mrs. Bandaranaike (SLFP) in the 1988
presidential elections. The UNP also won an absolute majority in the
1989 parliamentary elections. Mr. Premadasa was assassinated on May
1, 1993 by the Liberation Tigers of Tamil Eelam ("LTTE" or
"Tigers"), and was replaced by then-Prime Minister Dingiri
Banda Wijetunga, who appointed Ranil Wickremasinghe Prime Minister.

The
SLFP, the main party in the People's Alliance (PA) coalition,
returned to power in 1994 for the first time in 17 years. The PA won
a plurality in the August 1994 parliamentary elections and formed a
coalition government with Chandrika Bandaranaike Kumaratunga as Prime
Minister. Prime Minister Kumaratunga later won the November 1994
presidential elections and appointed her mother (former Prime
Minister Sirimavo Bandaranaike) to replace her as Prime Minister.
President Kumaratunga won re-election to another 6-year term in
December 1999. In August 2000, Mrs. Bandaranaike resigned as Prime
Minister for health reasons, and Ratnasiri Wickramanayake was
appointed to take her place. In December 2001, the UNP assumed power,
led by Prime Minister Ranil Wickremasinghe. Chandrika Kumaratunga
remained as President. In November of 2003, President Kumaratunga
suddenly took control of three key ministries, triggering a serious
cohabitation crisis.

In
January 2004, the SLFP and the JVP formed a political grouping known
as the United People's Freedom Alliance (UPFA). In February,
President Kumaratunga dissolved Parliament and called for fresh
elections. In these elections, which took place in April 2004, the
UPFA received 45% of the vote, with the UNP receiving 37% of the
vote. While it did not win enough seats to command a majority in
Parliament, the UPFA was able to form a government and appoint a
cabinet headed by Prime Minister Mahinda Rajapaksa. The JVP later
broke with the SLFP and left the government, but has often supported
it from outside.

Presidential
elections were held in November 2005, with Mahinda Rajapaksa becoming
President, and Ratnasiri Wickramanayake becoming Prime Minister.
President Rajapaksa stood for re-election 2 years before the end of
his term, in January 2010, and was reelected by a margin of 18% over
the opposition candidate, retired Army General Sarath Fonseka. The
presidential elections were soon followed by a large victory for
Rajapaksa’s UPFA coalition in April 2010 parliamentary elections,
where it captured 144 out of 225 seats possible, just shy of a
two-thirds majority. The remaining parliamentary seats were secured
by the United National Front (60), the Tamil National Alliance (14),
and the Democratic National Alliance (7).

Communal
CrisisHistorical
divisions continue to have an impact on Sri Lankan society and
politics. From independence, the Tamil minority has been uneasy with
the country's unitary form of government and apprehensive that the
Sinhalese majority would abuse Tamil rights. Those fears were
reinforced when S.W.R.D. Bandaranaike triumphed in the 1956 elections
after appealing to Sinhalese nationalism. His declaration that
Sinhala was the country's official language--an act felt by Tamils to
be a denigration of their own tongue--was the first in a series of
steps over the following decades that appeared discriminatory to
Tamils. Tamils also protested government educational policies and
agriculture programs that encouraged Sinhalese farmers from the south
to move to newly irrigated lands in the east. The decades following
1956 saw intermittent outbreaks of communal violence and growing
radicalization among Tamil groups. By the mid-1970s Tamil politicians
were moving from support for federalism to a demand for a separate
Tamil state--"Tamil Eelam"--in northern and eastern Sri
Lanka, areas of traditional Tamil settlement. In the 1977 elections,
the Tamil United Liberation Front (TULF) won all the seats in Tamil
areas on a platform of separatism. Other groups--particularly the
Liberation Tigers of Tamil Eelam (LTTE or Tamil Tigers)--sought an
independent state by force.

In
1983, the death of 13 Sinhalese soldiers at the hands of the LTTE
unleashed the largest outburst of communal violence in the country's
history. Hundreds of Tamils were killed in Colombo and elsewhere,
tens of thousands were left homeless, and more than 100,000 fled to
south India. The north and east became the scene of bloodshed as
security forces attempted to suppress the LTTE and other militant
groups. Terrorist incidents occurred in Colombo and other cities.
Each side in the conflict accused the other of violating human
rights. The conflict assumed an international dimension when the Sri
Lankan Government accused India of supporting the Tamil insurgents.

In
October 1997, the U.S. Government designated the LTTE as a foreign
terrorist organization under provisions of the Anti-Terrorism and
Effective Death Penalty Act of 1996 and has maintained this
designation since then, most recently redesignating the group in
October of 2003. The U.S. Government in November 2007 froze the
U.S.-held assets of the Tamils Rehabilitation Organisation, a
charitable organization associated with the LTTE, and in February
2009, the U.S. froze the assets of the Maryland-based Tamil
Foundation, on suspicion that they were funneling money to the LTTE.

Indian
PeacekeepingBy
mid-1987, India intervened in the conflict by air-dropping supplies
to prevent what it felt was harsh treatment and starvation of the
Tamil population in the Jaffna Peninsula caused by an economic
blockade by Colombo. Under a July 29, 1987, accord (the Indo-Lanka
Accord) signed by Indian Prime Minister Rajiv Gandhi and President
Jayewardene, the Sri Lankan Government made a number of concessions
to Tamil demands, which included devolution of power to the
provinces, merger--subject to later referendum--of the northern and
eastern provinces, and official status for the Tamil language. India
agreed to establish order in the north and east with an Indian
Peace-Keeping Force (IPKF) and to cease assisting Tamil insurgents.
Militant groups, although initially reluctant, agreed to surrender
their arms to the IPKF.

Within
weeks, however, the LTTE declared its intent to continue its armed
struggle for an independent Tamil Eelam and refused to disarm. The
IPKF found itself engaged in a bloody police action against the LTTE.
Further complicating the return to peace was a burgeoning Sinhalese
insurgency in the south. The JVP, relatively quiescent since the 1971
insurrection, began to reassert itself in 1987. Capitalizing on
opposition to the Indo-Lankan Accord in the Sinhalese community, the
JVP launched an intimidation campaign against supporters of the
accord. Numerous UNP and other government supporters were
assassinated. The government, relieved of its security burden by the
IPKF in the north and east, intensified its efforts in the south. The
JVP was crushed but at a high cost in human lives.

From
April 1989 through June 1990, the government engaged in direct
communications with the LTTE leadership. In the meantime, fighting
between the LTTE and the IPKF escalated in the north. India withdrew
the last of its forces from Sri Lanka in early 1990, and fighting
between the LTTE and the government resumed. Both the LTTE and
government forces committed serious human rights violations. In
January 1995, the Sri Lankan Government and the LTTE agreed to a
cessation of hostilities as a preliminary step in a
government-initiated plan for peace negotiations. After 3 months,
however, the LTTE unilaterally resumed hostilities. The government
then adopted a policy of military engagement with the Tigers, with
government forces liberating Jaffna from LTTE control by mid-1996 and
moving against LTTE positions in the northern part of the country
called the Vanni. An LTTE counteroffensive begun in October 1999
reversed most government gains and by May 2000 threatened government
forces in Jaffna. Heavy fighting continued into 2001.

Peace
Process, Resumption of Conflict, and Conclusion of FightingIn
December 2001, with the election of a new UNP government, the LTTE
and government declared unilateral cease-fires. In February 2002, the
Government of Sri Lanka (GSL) and LTTE signed a ceasefire agreement
sponsored by peace process facilitator Norway. Peace talks began in
Norway in December 2002. The Tigers dropped out of talks in February
2003, however, claiming they were being marginalized. In July 2004,
the first suicide bomb since 2001 struck Colombo.

In
March 2004, Eastern Tiger commander Karuna broke with the LTTE, going
underground with his supporters. In March 2006, the Karuna faction
registered a political party, the Tamil People's Liberation Tigers
(TMVP). The LTTE and the Karuna faction began targeting each other in
low-level attacks. In late 2007, Sivanesethurai Chandrakanthan
("Pillaiyan") took over the leadership of the TMVP. In
March 2008, Karuna left the TMVP and joined President Rajapaksa’s
SLFP as Minister for National Reconciliation.

Over
30,000 Sri Lankans died in the December 2004 tsunami, and hundreds of
thousands of others fled their homes. In June 2005, the GSL and LTTE
reached an agreement to share $3 billion in international tsunami
aid. However, the agreement was challenged in court and was never
implemented. In August 2005, the LTTE assassinated Foreign Minister
Lakshman Kadirgamar, an ethnic Tamil. Parliament passed a state of
emergency regulation that has been renewed every month since then.

During
the November 2005 presidential election, the LTTE enforced a voting
boycott in areas under its control. As a result, perceived hard-liner
and Sri Lanka Freedom Party (SLFP) leader Mahinda Rajapaksa won by a
narrow margin. Low-level violence between the LTTE and security
forces escalated. In December 2005, pro-LTTE Tamil National Alliance
Member of Parliament (MP) Joseph Pararajasingham was assassinated
within a GSL high-security zone in the eastern town of Batticaloa.

In
February 2006, exactly 4 years after the ceasefire agreement was
signed, the GSL and LTTE renewed their commitment to the agreement at
talks in Geneva. There was a lull in violence until April 2006, when
an explosion rocked a Sinhalese market in Trincomalee, followed by
limited Sinhalese backlash against Tamils. Several days later, an
LTTE suicide bomber attacked the main army compound in Colombo,
killing eight soldiers and seriously wounding Army Commander General
Fonseka. The government retaliated with air strikes on Tiger targets.
In June 2006, an LTTE suicide bomber succeeded in killing Army
third-in-command General Kulatunga in a suburb of Colombo.

The
European Union (EU) banned the LTTE as a terrorist organization on
May 30, 2006. In June 2006, GSL and LTTE delegations flew to Oslo to
discuss the future of the Scandinavian-led Sri Lanka Monitoring
Mission (SLMM). The Tigers refused to sit for talks with the GSL and
instead demanded the SLMM remove any monitors from EU-member
nations.

Heavy
fighting in August 2006, the worst since the 2002 ceasefire, killed
hundreds of people and caused tens of thousands to flee their homes
when the Tamil Tiger rebels clashed with government forces in the
north and east. In September 2006, the government carried out the
first major seizure of enemy territory by either side since the 2002
ceasefire when it drove Tamil Tiger rebels from the entrance of the
strategic Trincomalee harbor.

In
October 2006, the LTTE attacked a Navy bus convoy at a transit point
in Habarana, killing 90 sailors, and a few days later, attacked the
Sri Lankan Navy Headquarters in Galle, a major tourist destination in
the far south. Peace talks in Geneva at the end of October ended with
no progress. The LTTE attempted to assassinate the Defense Secretary
by bombing his motorcade in December 2006, but he escaped unharmed.

Government
troops took control of the LTTE's eastern stronghold of Vakarai in
January 2007, resulting in thousands more internally displaced
persons (IDPs). In March 2007, the Tamil Tiger rebels launched their
first-ever air attack, which targeted the Katunayake Air Force base
adjacent to Bandaranaike International Airport. By July 2007,
however, the government had recaptured the remaining territory held
in the Eastern Province from the Tigers. In November 2007, a Sri
Lankan Air Force bomb killed LTTE political chief and number two
leader, S.P. Tamilchelvan. Also during that month, the LTTE detonated
a bomb in a busy Colombo shopping center, killing 17 and wounding
many more.

In
January 2008, the government announced that it was unilaterally
abrogating the 2002 ceasefire agreement. Government forces stepped up
their campaign to assert control over the northern areas still led by
the LTTE. The LTTE resisted government advances into the north and
carried out attacks on economic and civilian targets in the south.

In
May 2008, elections were held for the first time to fill the newly
created Eastern Provincial Council covering the Ampara, Batticaloa,
and Trincomalee districts. Although opposition parties alleged
widespread vote-rigging, the government's United People's Freedom
Alliance in a coalition with the TMVP secured the majority in the new
Provincial Council, and TMVP leader Sivanesethurai Chandrakanthan
("Pillaiyan") was sworn in by President Rajapaksa as Chief
Minister.

The
conflict entered a new phase in September 2008 when government forces
initiated an offensive on LTTE, resulting in significant losses of
LTTE territory. The government continued to capture territory in
northern Sri Lanka through May 2009, when fighting became confined to
a small area of land near Mullaitivu, where thousands of civilians
were forcibly held by the LTTE in a government-designated “no fire
zone”. On May 19, the government declared victory over the LTTE as
they reported the capture of remaining Tiger-held territory and the
death of LTTE leader Velupillai Prabhakaran.

The
end of the military conflict resulted in nearly 300,000 internally
displaced persons and allegations of potential violations of
international humanitarian law and other harms committed by both
sides in the final stages of the conflict. IDPs were initially
detained at camps, primarily in Vavuniya area, but IDPs have been
permitted freedom of movement since December 2009. Most IDPs have
since returned to their home districts, staying primarily with host
families. But many have not been resettled in their homes, due to the
lingering presence of land mines and government-enforced
high-security zones. To date, international non-governmental
organizations, working in coordination with the Government of Sri
Lanka and the United Nations, have removed a reported 1.1 million
land mines. The humanitarian effort continues to progress--as of May
2010 it was estimated that 68,000 IDPs remained within the camps.

GOVERNMENTUnder
the 1978 constitution, the president of the republic, directly
elected for a 6-year term, is chief of state, head of government, and
commander in chief of the armed forces. Responsible to Parliament for
the exercise of duties under the constitution and laws, the president
may be removed from office by a two-thirds vote of Parliament with
the concurrence of the Supreme Court.

The
president appoints and heads a cabinet of ministers responsible to
Parliament. The president's deputy is the prime minister, who leads
the ruling party in Parliament. A parliamentary no-confidence vote
requires dissolution of the cabinet and the appointment of a new one
by the president.

Parliament
is a unicameral 225-member legislature elected by universal suffrage
and proportional representation to a 6-year term. The president may
summon, suspend, or end a legislative session and dissolve
Parliament. Parliament reserves the power to make all laws.

Sri
Lanka's judiciary consists of a Supreme Court, Court of Appeal, High
Court, and a number of subordinate courts. Sri Lanka's legal system
reflects diverse cultural influences. Criminal law is fundamentally
British. Basic civil law is Roman-Dutch. Laws pertaining to marriage,
divorce, and inheritance are communal.

Under
the Indo-Sri Lankan Accord of July 1987 and the 13th amendment to the
constitution, the Government of Sri Lanka agreed to devolve
significant authority to the provinces. Provincial Councils are
directly elected for 5-year terms. The leader of the council majority
serves as the province's chief minister; a provincial governor is
appointed by the president. The councils possess limited powers in
education, health, rural development, social services, agriculture,
security, and local taxation. Many of these powers are shared or
subject to central government oversight. As a result, the Provincial
Councils have never functioned effectively. Devolution proposals
under consideration as a means of finding a political solution to the
ethnic conflict foresee a strengthening of the Provincial Councils,
with greater autonomy from central control. Predating the accord are
municipal, urban, and rural councils with limited powers.

Principal
Government OfficialsPresident--Mahinda
RajapaksaPrime
Minister--Dissanayake Mudiyanselage JayaratneAmbassador
to the United States--Jaliya WickramasuriyaAmbassador
to the United Nations--Palitha T.B. Kohona

POLITICAL
CONDITIONSSri
Lanka's two major political parties--the UNP and the SLFP--have
historically embraced democratic values, international nonalignment,
and encouragement of Sinhalese culture. However, the SLFP-led
coalition government under President Rajapaksa, aided by emergency
regulations, has consolidated political power in the executive and
limited media freedom and the role of civil society in Sri Lankan
politics.

Sri
Lanka has a multi-party democracy that enjoys considerable stability
despite relatively high levels of political violence during its
26-year civil conflict. In May 2009, the government declared victory
over the LTTE and the LTTE’s longtime leader, Velupillai
Prabhakaran, was killed. The LTTE’s terrorist activities had
generally been aimed at destabilizing Sri Lanka politically,
economically, and socially. Economic targets included the airport in
July 2001, the Colombo World Trade Center in October 1997, and the
central bank in January 1996. In January 1998, the LTTE detonated a
truck bomb in Kandy, damaging the Temple of the Tooth relic, the
holiest Buddhist shrine in the country. After a lull following the
2002 ceasefire, LTTE-perpetrated terrorist bombings directed against
politicians and civilian targets became more common in Colombo,
Kandy, and elsewhere in the country. LTTE attacks on key political
figures included the attempted assassinations of Social Affairs
Minister Douglas Devananda in November 2007 and of Secretary of
Defense Gothabaya Rajapaksa in December 2006, the assassination of
Army General Kulatunga in June 2006, the attempted assassination of
Army Commander General Fonseka in April 2006, the assassination of
Foreign Minister Lakshman Kadirgamar in August 2005, the killing of
the Industrial Development Minister by suicide bombing in June 2000,
and the December 1999 attempted assassination of President
Kumaratunga. The LTTE is also suspected of being behind the
assassinations of two government ministers in early 2008.

In
the year following the defeat of the LTTE, the Sri Lankan Government
has faced widespread criticism on human rights issues. Shortly after
his defeat in the January 2010 presidential election, retired Army
General Sarath Fonseka was arrested and sequestered without facing
formal charges. He eventually was charged with engaging in politics
while still a serving military officer and corruption in military
procurements and tried by two courts martial, which found him guilty
in September 2010 and sentenced him to 30 months in prison and
stripped him of his pension and all military honors. The Government
of Sri Lanka received appeals from the international community that
any action against the former Army general be pursued in accordance
with Sri Lankan law and consistent with Sri Lanka’s political
traditions, but many observers regarded Fonseka's prosecution and
conviction as politically motivated. The Sri Lankan Government
received praise for pardoning Tamil journalist J.S. Tissanayagam in
May 2010, but concerns remain about the state of media freedom and
the ability of Sri Lankans to express dissent against government
policies and actions.

ECONOMYSri
Lanka is a lower-middle income developing nation with a gross
domestic product of about $50 billion (official exchange rate). This
translates into a per capita income of $5,100 (purchasing power
parity). Sri Lanka's 91% literacy rate in local languages and life
expectancy of 75 years rank well above those of India, Bangladesh,
and Pakistan. English language ability is relatively high, but has
declined significantly since the 1970s.

Sri
Lanka's income inequality is severe, with striking differences
between rural and urban areas. About 15% of the country's population
remains impoverished. The effects of 26 years of civil conflict,
falling agricultural labor productivity, lack of income-earning
opportunities for the rural population, high inflation, and poor
infrastructure outside the Western Province were impediments to
poverty reduction. There are reports that poverty has been decreasing
significantly in the last few years.

In
1978, Sri Lanka shifted away from a socialist orientation and opened
its economy to foreign investment. But the pace of reform has been
uneven. A period of aggressive economic reform under the UNP-led
government that ruled from 2002 to 2004 was followed by a more
statist approach under President Mahinda Rajapaksa.

Despite
a brutal civil war that began in 1983, economic growth has averaged
around 5% in the last 10 years. Due to the global recession and
escalation of violence during the final stages of the war, GDP growth
slowed to 3.5% in 2009 and foreign reserves fell sharply. Business
confidence rebounded quickly with the end of the war and an
International Monetary Fund (IMF) agreement in July 2009.
Consequently, Sri Lanka recorded strong growth in 2010, as GDP grew
by 8%. Official foreign reserves, including borrowings, reached $6.6
billion (5.9 months of imports). The post-war economic re-integration
of northern and eastern provinces has boosted agriculture and
fisheries, although a large area of agricultural land was damaged by
floods in early 2011. Reconstruction of the war-damaged areas as well
as infrastructure development throughout the country is also fueling
growth. Tourism has rebounded strongly to record levels. Exports grew
by a healthy 17% in 2010. Foreign remittance inflows from Sri Lankans
working abroad swelled to $4.1 billion in 2010 from $3.3 billion in
2009. The Colombo Stock Exchange was the second-best performing
market for the second year in a row. Inflation, which had reached
double digit levels during the war years, was around 7% in 2010.
Inflation pressures are building, and inflation reached 8.6% in March
2011. Foreign direct investment (FDI) remained relatively low in 2010
at about $450 million. The FDI target for 2011 is $1 billion,
including investments in the tourism sector.

Government
fiscal control remains a concern. The budget deficit reached almost
10% of GDP in 2009, but was forecast to fall to around 8% of GDP in
2010.

President
Rajapaksa's broad economic strategy outlined in his 2005 and 2010
election manifestos, "Mahinda Chintana" (Mahinda's
Thoughts), guides government economic policy. Mahinda Chintana
policies focus on poverty alleviation and steering investment to
disadvantaged areas; developing the small and medium enterprise (SME)
sector; promotion of agriculture; and developing Sri Lanka to become
the regional hub of ports, aviation, commerce, knowledge, and energy.
The government has developed a 10-year development framework to boost
growth through a combination of large infrastructure projects. The
Rajapaksa government rejects the privatization of state enterprises,
including "strategic" enterprises such as state-owned
banks, airports, and electrical utilities. Instead, it plans to
retain ownership and management of these enterprises and make them
profitable.

The
Mahinda Chintana plan aims to double Sri Lanka’s per capita income
to $4,000 within 6 years. To do so, Sri Lanka requires GDP growth
well over 8%, and the investment rate needs to rise from 25% of GDP
to 35% of GDP.

Sri
Lanka’s economy will continue its post-war resurgence and is
expected to grow strongly in the immediate term. Although Sri Lanka
should maintain moderate economic growth, Sri Lanka needs to enact
important policy reforms to reach its full economic potential. Sri
Lanka has set the goal of improving its business climate, but must
follow through with reforms to decrease bureaucratic red tape;
increase transparency, particularly in government procurement; and
increase the predictability of government policies. Sri Lanka must
also continue to improve its fiscal discipline. The 26-year conflict
and high government expenditure have contributed to Sri Lanka's high
public debt load (83% of GDP in 2009).

Sri
Lanka depends on a strong global economy for investment and for
expansion of its export base. It has been advised to diversify export
products and destinations to make use of the Indo-Lanka and
Pakistan-Sri Lanka Free Trade Agreements and to benefit from rapid
economic growth in emerging East Asia. Sri Lanka's exports to the
European Union qualified for duty-free entry under the EU Generalized
System of Preferences (GSP) Plus market access program, granted in
2005 to help Sri Lanka rebuild after the 2004 tsunami. However, after
a lengthy review process, the European Union suspended the GSP Plus
market access benefit in August 2010, due to Sri Lanka’s poor human
rights record. Nevertheless, Sri Lanka’s exports grew strongly by
over 17% in 2010, despite the loss of this benefit. Sri Lanka
continues to receive limited tariff preferences under the EU GSP
program. Sri Lanka also receives preferential access to the U.S.
market under the U.S. GSP program. This program has been temporarily
suspended pending congressional approval.

The
service sector is the largest component of GDP at almost 60%. In
2010, service sector growth increased to 8% from about 3% in 2009.
Tourism, shipping, aviation, telecom, trading, and financial services
were the main contributors to growth. Public administration and
defense expenditures increased in recent years due to hostilities,
and there has been an expansion of public sector employment. Despite
the end of the war, defense expenditures remain at around 3.9% of
GDP. There is a growing information technology sector, especially
information technology training and software development.

Industry
accounts for almost 30% of GDP. Manufacturing is the largest
industrial subsector, accounting for 17% of GDP. The construction
sector accounts for 7% of GDP. Mining and quarrying account for 2% of
GDP. Electricity, gas, and water account for 2% of GDP. Within the
manufacturing sector, food, beverage, and tobacco is the largest
subsector in terms of value addition. Textiles, apparel, and leather
is the second-largest sector. The third-largest sector in value added
terms is chemical, petroleum, rubber, and plastic products.

Agriculture
has lost its relative importance to the Sri Lankan economy in recent
decades. It employs 31% of the working population, but accounts for
only about 11% of GDP. Rice, the staple cereal, is cultivated
extensively. The plantation sector consists of tea, rubber, and
coconut; in recent years, the tea crop has made significant
contributions to export earnings. Domestic agriculture such as rice
and other food crops improved significantly with the return of peace
to the eastern and northern provinces. However, floods in early 2011
destroyed many crops and livestock, including rice, in the main
cultivation period.

Trade
and Foreign AssistanceSri
Lanka's exports (mainly apparel, tea, rubber, gems and jewelry) were
estimated at $8.3 billion and imports (mainly oil, textiles, food,
and machinery) were estimated at $13.5 billion for 2010. The
resulting large trade deficit was financed primarily by remittances
from Sri Lankan expatriate workers, foreign assistance, and
commercial borrowing. Sri Lanka must diversify its exports beyond
garments and tea. The information technology (IT) and business
process outsourcing (BPO) sector is small but growing.

Exports
to the United States, Sri Lanka's most important single-country
market, were estimated to be around $1.77 billion for 2010, or 21% of
total exports. The United States is Sri Lanka's second-biggest market
for garments, taking almost 40% of total garment exports. (The EU as
a whole is Sri Lanka's biggest export market and largest apparel
buyer.) India is Sri Lanka's largest source of imports, accounting
for over 20% of imports. United States exports to Sri Lanka were
estimated to be around $178 million for 2010, consisting primarily of
machinery and mechanical appliances, medical and scientific
equipment, electrical apparatus, wheat, plastics, lentils, and
paper.

Sri
Lanka is a large recipient of foreign assistance, with China, the
World Bank, the Asian Development Bank, Japan, and other donors
disbursing loans totaling almost $1.0 billion in 2009. China is a
major lender for infrastructure projects, such as a new port, a coal
power plant, and roads. Iran is also a major lender to Sri Lanka and
has committed $450 million for the Uma Oya multipurpose irrigation
project and $111 for rural electrification. Iran provides an
interest-free credit facility for oil imports. Iran has also promised
assistance for modernization of Sri Lanka's only oil refinery, though
no firm commitments are in place. The Government of India is
providing loans for the railway sector. Foreign grants amounted to
$230 million in 2009. There continue to be problems with projects
awarded without tenders.

LaborThe
unemployment rate declined to 4.5% in fourth-quarter 2010, from 5.7%
in fourth-quarter 2009. Unemployment is highest in the 20-29 age
group. The rate of unemployment among women and high school and
college graduates has been proportionally higher than the rate for
less-educated workers. The government has embarked on educational
reforms it hopes will lead to better preparation of students and
better matches between graduates and jobs.

Approximately
20% of the 7.6 million-strong work force is unionized, but union
membership is declining. There are more than 1,900 registered trade
unions, many of which have 50 or fewer members, and 19 federations.
Many unions have political affiliations. The Ceylon Workers Congress
(CWC) and Lanka Jathika Estate Workers Union are the two largest
unions, representing workers in the plantation sector. The president
of the CWC also is Minister of Livestock and Rural Community
Development. Other strong and influential trade unions include the
Ceylon Mercantile Union, Sri Lanka Nidhahas Sevaka Sangamaya, Jathika
Sevaka Sangayama, Ceylon Federation of Trade Unions, Ceylon Bank
Employees Union, Union of Post and Telecommunication Officers,
Conference of Public Sector Independent Trade Unions, and the
JVP-aligned Inter-Company Trade Union.

Public
sector trade unions usually resist government moves to restructure
state-owned corporations. The Government of Sri Lanka has no plans to
privatize any state-owned enterprises, and in some cases the
government has reversed prior privatizations.

There
are 1.7 million Sri Lankan citizens working abroad. A majority are
women working as housemaids. Remittances from migrant workers,
estimated at around $4.1 billion in 2010, is the most important
source of foreign exchange for Sri Lanka, surpassing earnings from
apparel exports.

FOREIGN
RELATIONSSri
Lanka traditionally follows a nonaligned foreign policy but has been
seeking closer relations with the United States since December 2001.
It participates in multilateral diplomacy, particularly at the United
Nations, where it seeks to promote sovereignty, independence, and
development in the developing world. Sri Lanka was a founding member
of the Non-Aligned Movement (NAM). It also is a member of the
Commonwealth, the South Asian Association for Regional Cooperation
(SAARC), the World Bank, International Monetary Fund, Asian
Development Bank, and the Colombo Plan. Sri Lanka continues its
active participation in the NAM, while also stressing the importance
it places on regionalism by playing a strong role in SAARC.

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